During Chevron’s Nov. 12 investor day, the company unveiled plans for a 2.5-GW natural gas–fired power facility in the Permian Basin, designed specifically to supply a co-located artificial intelligence data center through a behind-the-meter, or off-grid structure. The project represents Chevron’s first dedicated data center power asset, and the company noted the project could ultimately expand to 5 GW. The company expects the facility to be operating by 2027. The project also fits into the company’s February 2025 partnership with GE Vernova and Engine No. 1 to pursue up to four additional gas-fired data-center plants across the U.S.
To date, much of the discussion about upstream and AI infrastructure has focused on Appalachia’s grid and infrastructure constraints. Chevron’s move represents a long-awaited announcement in the Permian, where stable long-term associated gas growth, increasing basin consolidation, and an attractive supply profile aligns well with the needs of large-scale, baseload-focused AI power needs. We highlighted the advantages of producer, power plant, and data center partnerships in our “Why Utica. Why Now” report that outlined the strategic advantage behind EOG’s move into the Appalachia region.
We believe relatively cheap in-basin gas will persist (specifics below) and this aligns with CVX’s decision to move forward on this investment. Recent Novi Intelligence research reports on data center economics and future supply scenarios in the Permian touched on these dynamics.
Permian Supply: All Gas and No Brakes
This strategic pivot aligns with what we are seeing in our basin-level analysis. In our most recent Permian supply scenario analysis we modelled three scenarios: S1 assumes flat lateral feet drilled per year, S2 assumes a continuation of recent year-on-year increases to lateral feet drilled per year (minus 3%-5% YoY), and S3 assumes a temporary period of low prices in 26/27 leading to a short period of decreased lateral footage per year (3%-5%) followed by a return to the 2024 activity levels and held flat indefinitely.
- In the S1 scenario, we estimate that dry gas production outpaces Permian egress in 2026. However, from 2027 through 2032 the basin is forecast to have marginal excess capacity; by 2033 new pipelines are needed.
- In the S2 scenario we see the same oversupply in 2026 followed by relative balance between 2027 and 2030; by 2031 new egress is needed and supply begins to rapidly outpace pipeline capacity.
- In S3 we estimate that the basin experiences ample capacity from 2027 through to 2035 when supply begins to marginally outpace egress.
Across two of these three scenarios we expect supply and pipeline capacity to be roughly in line for the remainder of the 2020’s. A sustained two-year period of low oil prices, like we modelled in the S3 scenario, would be needed to create meaningful excess egress and drive upward pressure on Waha. Put another way, from 2027 to 2030 we expect Waha to mimic the balanced to slight excess-egress environment the industry saw in 2020 through 2022 when differentials averaged ~$0.25/Mcf to ~$1.25/Mcf. Ultimately, relatively cheap in-basin gas is here to stay and this will benefit Chevron’s power plant project.
[img class=”wp-image-50001 size-full” src=”https://novilabs.com/wp-content/uploads/2025/11/Screenshot-2025-11-18-at-10.43.00.png” alt=”Stacked area chart showing oil production by region from 2017 to 2023, featuring capacity and production lines, with a basis differential chart below tracking price differences and including Williston Basin inventory and breakeven analysis 2025.” width=”1093″ height=”761″ /> Sources: Public Sources (pipeline capacity data); Novi Insights, Novi Intelligence (production data); RBN Energy (Waha Prices). (Note: Legacy + Local contains inter and intrastate pipelines and our estimated local demand)
Data Center Alley and The NE “Power Grab”
The AI boom is resulting in a literal “power grab” in the Appalachia region with data center developers and AI hyperscalers coveting the always-on baseload-type power offered by natural gas CCGTs. This model can provide a template for a similar buildout in West Texas. Old plants are being redeveloped and expanded, and new plants are being built both on the grid and “behind the meter” to serve growth in data centers in “Data Center Alley” in Northern Virginia but also spanning from Pittsburgh to the Utica’s backyard in Ohio.
Our illustrative data center case study, using the Socrates Power Plant and Meta’s recently announced Prometheus data center cluster in New Albany, Ohio, indicates that in a pure inference case, a 200 MW data center could generate $32 billion/year in inference token revenue, representing $3,256 per mcf of gas consumed in power generation in total value creation. Numbers like this are only illustrative but support continued data center demand growth for gas-fired power generation in the region.
Key Takeaways
- Chevron announced a 2.5-GW natural gas–fired power facility in the Permian Basin to serve a co-located AI data center behind the meter.
- Chevron said the Permian power project could expand to 5 GW and is expected to be operating by 2027.
- Chevron’s Permian facility is the company’s first dedicated data center power asset.
- Chevron’s February 2025 partnership with GE Vernova and Engine No. 1 targets up to four additional U.S. gas-fired data-center plants.
- Novi Intelligence’s Permian S1 scenario estimates dry gas production outpaces basin egress in 2026 and requires new pipelines by 2033.
- Novi Intelligence’s Permian S2 scenario projects oversupply in 2026 and indicates new egress is needed by 2031 as supply outpaces capacity.
- Novi Intelligence’s Permian S3 scenario forecasts ample capacity from 2027 to 2035, with supply marginally outpacing egress in 2035.
- Novi Intelligence projected Waha differentials of about $0.25/Mcf to $1.25/Mcf from 2027 to 2030, similar to 2020–2022 averages.
